Correlation Between TSJA and IShares Mortgage

Can any of the company-specific risk be diversified away by investing in both TSJA and IShares Mortgage at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining TSJA and IShares Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TSJA and iShares Mortgage Real, you can compare the effects of market volatilities on TSJA and IShares Mortgage and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in TSJA with a short position of IShares Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of TSJA and IShares Mortgage.

Diversification Opportunities for TSJA and IShares Mortgage

-0.62

Correlation Coefficient

TSJA  IShares Mortgage

Excellent diversification

The 3 months correlation between TSJA and IShares is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding TSJA and iShares Mortgage Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Mortgage Real and TSJA is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on TSJA are associated (or correlated) with IShares Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Mortgage Real has no effect on the direction of TSJA i.e., TSJA and IShares Mortgage go up and down completely randomly.

Pair Corralation between TSJA and IShares Mortgage

If you would invest  2,773  in TSJA on August 30, 2024 and sell it today you would earn a total of  0.00  from holding TSJA or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

TSJA  vs.  iShares Mortgage Real

TSJA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TSJA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking indicators, TSJA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

iShares Mortgage Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Mortgage Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, IShares Mortgage is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with TSJA and IShares Mortgage

The main advantage of trading using opposite TSJA and IShares Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TSJA position performs unexpectedly, IShares Mortgage can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IShares Mortgage will offset losses from the drop in IShares Mortgage's long position.

The idea behind TSJA and iShares Mortgage Real pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..